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Three years later, Tidal is still waiting for its big wave

Three years later, Tidal is still waiting for its big wave

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Photo by Amelia Holowaty Krales / The Verge

A little over two years ago, Tidal announced it had reached 3 million subscribers in a press release celebrating its one year anniversary under a new ownership group comprised of high-profile artists led by Jay Z. Since that announcement, Tidal has made numerous updates to its service and apps, including a full redesign, adding high-resolution audio streams, and support for Sonos, Apple CarPlay and Android Auto, Apple TV and Android TV, and Amazon’s Fire TV.

The company has gotten into original programming, launched a podcast network featuring some of the biggest hip-hop personalities around, and struck a deal with Dubset to stream DJ sets and remixes on its platform. And most notably, Sprint paid $200 million for a third of Tidal, valuing the company at $600 million, a tenfold increase on the $56 million Jay Z paid to acquire it in 2015.

At a cursory glance, it would seem like Tidal is a company on the rise, and a potential challenger to the dominant streaming services of Spotify and Apple Music. So why is Tidal still not quite competing at the levels of its peers? According to numerous sources speaking to The Verge, a combination of bad business practices, an outdated marketing strategy, and the lingering derision born from the botched relaunch of the company in 2015 have kept the service from becoming a serious challenger. Sources say Tidal’s subscriber growth has stalled, and the company has been late on numerous payments to music labels in the past two years, confirming a report from Norwegian newspaper Dagens Næringsliv last month.

Tidal’s subscriber growth has stalled, and the company has been late on numerous payments to music labels in the past two years

Tidal hired Richard Sanders, the former president of Kobalt Music Group, as CEO last August after it parted with its former chief Jeff Toig in May 2017. The hope in the industry was that Sanders, a proven record executive and Tidal’s fourth boss in two years, could bring some stability to a company that has had its share of turmoil, from a relaunch that was largely considered a debacle, to early issues streaming its exclusive albums — the staple of the company’s marketing strategy — on release days, and what seemed to be a revolving door of executives.

But according to sources, with Sanders (who was not made available by Tidal to speak with The Verge) at the helm, nothing has changed when it comes to how the company handles its business. For Tidal, the way it handles its business is its biggest issue. Last year, Dagens Næringsliv reported that Tidal was inflating its subscriber numbers, pointing to internal reports it obtained that showed a total subscribers number of 1.2 million rather than the touted 3 million. The publication also reported in December that Tidal only had six months of working capital left (which would run out this month), a claim Tidal denied at the time. A source close to the company noted that the lack of funding narrative has been a constant around the company since the new ownership group took over. “They said Tidal wouldn’t make it to the end of 2015, then they said they wouldn’t make it to a year, then the end of this month, which is a couple days away. They are going to continue to be proven wrong.”

“They are going to continue to be proven wrong.”

Last month Dagens Næringsliv followed up with another report, once again accusing Tidal of inflating its subscriber numbers and the streams of two albums it had under exclusive windows — Kanye West’s The Life of Pablo and Beyoncé’s Lemonade — based on data the publication found on a hard drive belonging to Tidal the publication obtained through means it did not disclose. In a statement to Variety, Tidal CEO Richard Sanders denied the publication’s report, but went on to say the company would investigate the potential data breach, raising doubts about the veracity of that denial. “We reject and deny the claims that have been made by Dagens Næringsliv,” Sanders told Variety. “When we learned of a potential data breach we immediately, and aggressively, began pursuing multiple avenues available to uncover what occurred.”

Tidal’s entire marketing strategy of using exclusives to grow the service has largely been ruled ineffective by the music industry. Apple, which followed Tidal down the exclusive rabbit hole, essentially gave up on the practice after about a year. Spotify avoided it pretty much entirely. Universal Music Group CEO Lucian Grainge effectively banned exclusives on his label after Frank Ocean released his critically acclaimed album Blonde exclusively on Apple Music 24 hours after fulfilling his record deal with Def Jam, a UMG subsidiary, with Endless, a half-finished visual album featuring incomplete verses and 45 minutes of woodworking. “Exclusives don’t, in the long run, work,” one music executive told me.

“Exclusives don’t, in the long run, work.”

Tidal has continued the practice, albeit in a reduced fashion than the week-long exclusives they employed in 2015 and 2016. Earlier this month, Jay Z and Beyoncé’s joint album Everything is Love was released exclusively on Tidal for around 30 hours before becoming available on competing paid streaming services. “The limited exclusive reminded us that Tidal still exists,” Larry Miller, director of NYU Steinhardt’s Music Business Program told me. “It is likely that the one-day exclusive caused a bump in new subscriptions, but by the time word really got out on Monday, the album was available on the major services to paid subscribers. Limited exclusives are a very 2016 strategy.”

Russ Crupnick, the managing director at the market research firm MusicWatch, agrees. I don’t see much movement in terms of [Tidal’s] awareness in the marketplace,” Crupnick said. “Compared to radio and CDs and all the other ways that we can listen to music, streaming has gained almost 10 share points over the last couple of years. All that growth is coming from Spotify and Apple and Amazon. Tidal barely registers.”

In numbers shared with The Verge, MusicWatch estimates that Tidal today has around 3 million subscribers globally — including trial accounts — and around a 10 percent “aided awareness level” in the US. “That means if you show people a list of paid streaming services, 10 percent say they know about Tidal,” Crupnick said. “It’s about 50 percent for Spotify Premium or Apple Music.”

There’s also a growing sentiment throughout the industry that Tidal will have to sell if it wants to continue to operate long-term. Multiple sources say Tidal was in talks about a deal with Napster (formerly Rhapsody) which fizzled out, and the company has reportedly had discussions about a deal with Apple in the past. But the best acquisition option seems to be Sprint, which already owns a chunk of the company, and could potentially subsidize the streaming service if its merger with T-Mobile goes through as a way to entice users to leave AT&T and Verizon.

MusicWatch estimates that Tidal has around 3 million subscribers globally, including trial accounts, the same number it claimed in 2016

What’s interesting about Tidal is questionable business habits usually don’t have this big of a negative effect on the public perception of a streaming service (see: Apple, Spotify). From everyone that I’ve spoken to, it’s pretty unanimous that Tidal has notably improved its service over the years. But with no new marketing strategy, the lack of awareness around Tidal in the US, and the seemingly continued disdain from those who do know the service and remember that tone deaf launch, the odds of Tidal turning up the growth and becoming a legitimate music streaming competitor to Spotify and Apple are shrinking by the day.

“I think the service is actually pretty good,” Crupnick said. “I’ve used Tidal a lot over the past couple of years and I think it’s a decent service. From my perspective it’s not an issue of whether or not it’s a poor service, it’s more an issue of has it just been left behind.”

Tidal declined to comment.